AI Spending Concerns Dampen Tech Giants' Momentum
The once-mighty "Magnificent Seven" tech stocks have faltered in 2025 due to fears over rising AI spending. Only Meta has managed to deliver double-digit gains, while the others have underperformed the S&P 500.
Meta Stands Out
Meta has surged 20% year-to-date, continuing its impressive 15-day winning streak. Amazon is the only other Mag Seven component in positive territory, up 5.9%. Alphabet, Apple, Nvidia, Microsoft, and Tesla have all declined.
Tesla Lags
Tesla has been the worst performer, down 6% due to weak sales and tariff concerns. General Motors and Ford have also struggled.
Earnings Disappoints
Of the seven Mag Seven members that have reported fourth-quarter earnings, only Meta has risen. Alphabet has fallen the most (10.4%), reflecting market skepticism about AI monetization.
Capital Expenditure Worries
Big Tech companies are planning to spend heavily on AI infrastructure in 2025, raising concerns about profit margins. Meta, Microsoft, Amazon, and Alphabet are expected to invest a combined $325 billion.
Crowded Trades
Analysts warn that Mag Seven stocks, particularly Amazon, are crowded trades. The debate over AI spending is expected to continue.
Impact on Broader Market
The Mag Seven's combined weighting in the S&P 500 has reached a record high of 30%. If their weakness persists, it could drag down the broader market.
Near-Term Test
Nvidia's Feb. 26 earnings report will be a key indicator for Mag Seven bulls.